A plan by President Obama to provide relief to some homeowners underwater on their mortgages is welcome but, all the same, too late for many out there who could have used the help a long time ago.
The plan -- which is an executive rule and doesn't need congressional approval -- would allow homeowners who owe more than their homes are worth to refinance existing mortgages to lower interest rates and cheaper monthly payments.
Indeed, welcome news to the million or so homeowners who qualify, but it does nothing to help the 3.5 million borrowers who are seriously delinquent or are already in default. This administration has been slow to react to the financial crisis, especially when it comes to the struggling Americans buried in debt and trying to keep a roof over their heads. Obama acknowledged that desperate need for relief a few years ago on the campaign trail but seemed to have lost his focus on how to get there.
This recent policy change is paired with Wednesday's announcement of a plan to allow millions of student loan recipients to lower their payments and consolidate their loans.
It's difficult to estimate how many homeowners will be helped by the new mortgage refinance rules. The Federal Housing Finance Agency estimated the number at 1 million, Moody's Analytics put the number as high as 1.6 million, and Dean Baker, co-director of the Center for Economic and Policy Research in Washington, told CBS News that the number will likely be closer to 800,000.
Under the president's plan, homeowners who are current on their mortgage payments would be able to refinance regardless of how much their home value has dropped below what they owe. Previously, borrowers who owed more than 125 percent of the value of their homes couldn't participate. Still, only borrowers with mortgages through Fannie Mae and Freddie Mac on or before May 31, 2009, can qualify. Their loan amounts must top 80 percent of the current market value of their homes and they must be current on their payments, with no late payment in the last six months and no more than one late payment in the last 12 months.
Obama has pointed the finger at Republicans, blaming them for not cooperating on measures that would help many more homeowners. But the president has also failed to act quickly and aggressively in areas where he could be effective.
Western New York has been spared the worst effects of the housing crisis. Still, the depressed housing market remains an enormous drag on the entire U.S. economy, especially in Nevada, California and Arizona. Bloomberg News estimates that 60 percent of Nevada homeowners are underwater, some owing more than twice what their homes are worth.
This latest action is helpful, but just a small step toward bringing the housing market back to life.